The crack appeared a few years ago, and has been creeping towards the town of Kiruna ever since.

“The mines are underneath us,” says Göran Cars. It’s early afternoon but the sun is already setting behind the mountain, colouring the clouds and outlining the town’s most prominent feature: two huge smokestacks. “And you can see the direction of the cracks – coming from the mine, and going straight up to the city centre.”

The mine, Kiirunavaara, is the reason this Swedish town of roughly 20,000 people deep in northern Lapland exists at all. It is one the world’s largest underground iron ore mines, and it dominates both economically and visually, the smokestacks sending up twin plumes of black smoke from the denuded mountain like a kind of Arctic Mordor.

Over a century, the miners have tunnelled so deep into the earth – 2km at some points – that they have now literally undermined the town. The caverns are causing subsidence, weakening the structure of the buildings, and opening a great crack in the earth itself, which grows wider and several metres closer to the city every year. Kiruna is about to be swallowed by the very mine that gave it life.

So, in 2004, a plan was hatched. Luossavaara-Kiirunavaara AB (LKAB), the gigantic state-owned company that operates the mine, would simply move the city – houses and all.

It identified a condemned zone threatened by the growing sinkhole, and gave everyone living there three choices: LKAB would move you to a new apartment, buy you out at market rate plus 25%, or, if feasible, load your house on to a flatbed lorry and move it to the new city.

It was Cars who was given the responsibility to plan that new city.

“The basic idea here was to have a town square, because the present town doesn’t have a town square,” Cars said last week at the ribbon-cutting for City Hall, the first building in the new Kiruna. A very modern and very gold building designed by the Danish architects Henning Larsen, its most notable feature is that it has an art gallery built into it – the new Konstmuseet i Norr – a rectangular structure that squats inside the atrium like a cube of potato wrapped in smoked salmon.

Currently, City Hall sits more or less alone in what feels like the middle of nowhere. In fact the site was the former city dump, and then a succession of factories and junkyards known locally as Death Valley. But if Cars is to be believed, by no later than 1 September 2020 there will be an entire town on this spot.

The plans show mixed-use commercial and residential buildings, cinemas, libraries and hotels, radiating in broad avenues from City Hall – and all of it built at the kind of super-dense scale you expect in a capital city, not a sprawling town 100 miles north of the Arctic Circle.

The scale of the project is unprecedented. Several dozen buildings will be moved by a specially assembled team of experts who have become so good at their jobs that Cars claims it’s now usually cheaper to move a home than to demolish and rebuild. The huge wooden church will be hoisted and moved; other buildings, such as the current city hall and the railway station, will be stripped of aesthetic elements, including lampposts and iron railings, to be incorporated into new structures.

LKAB, the mining company, is such a big deal in Sweden that it's hard to really be critical enough

Alice Bah Kuhnke, minister for culture and democracy

And all of it will be paid for by LKAB. It’s not exactly generosity that is motivating the company. “The law is crystal clear,” Cars says. “The mine is required by Swedish national law to compensate for the structural damage it has caused.”

It’s also about survival. “Part of Kiruna’s absolute problem is that women have been moving away from the town while men have been staying on,” Cars says. He tells of efforts to attract foreign women to marry mineworkers. “Russians were popular. You had ads: ‘Wealthy miners looking for female company’, he says, adding: “This was some time ago.”

The deeper the mine, the more expensive it becomes to remove the iron – and the number of jobs is dropping, too, due to automation. In a globalised age it is increasingly hard to convince young people with university degrees to live deep inside the Arctic Circle.

“Our employees live here,” says Johan Mäkitaavola, project manager of LKAB. “I live in Kiruna. I want to have a nice city to live in. I hope my children will stay here or at least come back when they have studied. We need educated people to move to Kiruna and work.”

To survive, the city needs to diversify. It is already home to a budding space industry, and in the winter there are direct flights from Tokyo and Shanghai for sightseers eager to glimpse the northern lights. It remains impossible, however, to imagine Kiruna without LKAB, and vice versa.

A digital rendering of a plan for the shopping street in the new Kiruna city centre. Photograph: White Ghilardi+Hellsten Tegmark

“It’s a big deal,” says Alice Bah Kuhnke, the Swedish minister for culture and democracy, who attended the opening ceremony along with the king of Sweden. “Big. For Swedes, LKAB has almost been part of our DNA – they are so important to the finances of the Swedish state. So for us that’s a really challenging thought, because since it’s such a big deal it’s hard as a politician and as a Swede to really be critical enough.”

Part of that means acknowledging an inconvenient truth – the fact that the new town sits on the territory of the Sami, the indigenous people of Lapland, whose reindeer herding is frequently disrupted by mining. The Sami convene their Swedish parliament in Kiruna – though you wouldn’t know it from the opening ceremony.

“Where’s the Sami flag? Where’s the Sami representative [on stage]?” says Carola Grahn, a Sami artist whose work is exhibited in the new gallery. “We have a Sami parliament but the head of the Sami parliament wasn’t invited.”

“They just don’t need to give a fuck so they don’t give a fuck,” says Nils Johan Labba with a shrug. A traditional craftsman with an 18-month waiting list for his knives, he is also a member of the Sami parliament. “We have a reindeer community here, this is their moving territory. Or it was – everything changed with the city. Kiruna as a city doesn’t take much consideration about Sami people or Sami lifestyles.”

The indigenous Sami people are traditional reindeer herders – an activity frequently interrupted by mining. Photograph: Grahame Soden/Guardian Community

A sense of betrayal is rooted in the Sami experience in Kiruna; several Sami told me versions of an apocryphal story about a Sami man discovering a special heavy stone, and being tricked by a Swedish prospector into revealing the location of the iron ore deposits.

The company seems exasperated by the issue. “They have their interest in this land and we have ours,” says Mäkitaavola. “So it’s a problem. It’s not easy.”

Stefan Sydberg, Kiruna’s deputy mayor, acknowledges the Sami people’s interests must be respected. “But moving the city centre to this area has the least impact, because this is an old industrial area. There haven’t been any reindeer in this area since before the city transformation.

“We can’t just sit and say we can’t do anything because we have the reindeer herders. We have to evolve as a city. Because they prosper from that as well.”

The impression Kiruna’s officials clearly want to give is of a kind of northern Swedish pragmatism. The city wouldn’t exist without the mine, so it had to be moved; yes, of course that is expensive; true, it’s Sami territory, but what isn’t? Up here, you simply get the job done.

The townspeople are less sanguine. Jan Lindgren is the third-generation owner of Centrum JW Lindgren clothing store (“They always film our sign when they shoot something in Kiruna – the sign and the mountain”) and speaks with a mixture of anxiety and resignation about having to move in 2022. “At first we were negative,” he says. “But we thought it would be very good if they do the right things from the beginning. If they do what they say they will do.”

He’ll be renting in the new town, and the shop will be smaller. “There’s a lot of history here,” he says. “But we have planned for 10 or 12 years. We discussed. Would it be the same views? We can see the mountains on a clear day here, but not in the new place. That’s sad.”

As well as being less picturesque, the new city centre is colder: flatter, windier and more exposed, though presumably the new buildings will mitigate that barrenness.

Birgitta Dahlberg owns one of the apartments being destroyed. “I have to go,” says the retail worker with a shrug. “I’m really hopeful I’ll get somewhere to stay, and that I can choose from old apartments [vacated by people moving to newer ones]. I don’t wanna move. I have a great flat. I just bought it! But maybe it’ll be better in the new place. Who knows?”

There is a stepped system of rent increases over eight years to gradually accustom tenants to the new payments, capped at 20% above their former rate, but Dahlberg says many people on low incomes don’t have any room in their budgets. “It’s sad. There’s a lot of uncertainty. There are so many questions on our mind. Where will I live? Can I afford it? Will I have existed?” Her past will be wiped away. The city of her childhood will be gone, demolished by bulldozers. “You might just see a tree you planted, and nothing else. You can’t think about it, it’s too much – you have to keep focused on the day to day.”

Mixed feelings abound. “It’s complicated. Even Sami people work in the mine sometimes,” says Grahn. “So it’s not simple to take a stand.”

The clocktower from the old City Hall was moved to the new location. Photograph: Peter Rosén/LapplandMedia

But she says it remains important to show that there is more to Kiruna than the wishes of the company. One of her artworks displayed at the gallery is a bouncy castle, shaped and painted to resemble a mountain. A window beside it has a view of an actual mountain, Luossavaara – a disused mine – as well as tiny mountains of rubble: the first construction sites of the new Kiruna buildings. “I don’t think I need to explain the sadness,” she says, and mentions another mining project – this one in Jokkmokk, in Sami territory south of Kiruna.

“My cousin, who’s a reindeer herder, said it very well. He was like, ‘Where they want to drill the hole, that area’s not really our most prominent [territory]. But we have to, now, say No. Because when the mine starts to make money, we can’t stop it.

“I mean, look how right he is,” she says, her eyes wide as she looks out past her inflatable mountain to the actual one. “They’re moving a whole town.”